Wage Raises in Emerging Markets Outpace Developed Economies

Employees in high-growth “emerging” market countries will see their wages rise sharply in 2013, while their counterparts in North America and Europe can expect more modest pay raises in the coming year, according to the latest
2013 pay forecast data from consultancy Hay Group.

In the so-called BRIC countries (Brazil, Russia, India and China), pay will climb significantly in 2013:

• Brazil—up 5.5 percent.

• Russia—up 9 percent.

• India—up 10.5 percent.

• China—up 9.5 percent.

Meanwhile, developed economies can expect more cautious increases—for example, just 3 percent in the United States and United Kingdom. With annual consumer price index growth factored in—2 percent in the U.S. and 2.8 percent in the U.K.—employees in these two countries are set to see a net pay gain of 1 percent and 0.2 percent, respectively.

“Ongoing economic uncertainty in North America and Europe has caused organizations in these regions to take a more cautious approach to salary increases than their high-growth-market counterparts,” said Jeff Blair, Hay Group’s U.S. productivized services leader. “Global organizations trying to attract top talent across both markets will have to pay careful attention to reward program design and focus more on creating positive cultures with strong values to attract, engage and retain high-performing employees in each region.”

For example, with pay rates barely outstripping or in some cases falling behind inflation, North American and European organizations should place a greater emphasis on variable pay and nonfinancial recognition programs, as well as career development opportunities to retain key talent, Blair advised.

Regional Pay Forecasts

From a regional perspective, the following average pay increase rates were forecast by Hay Group:

• Latin America—up 8.9 percent. Latin American firms are set to be the big spenders of 2013, especially in countries with high inflation rates. Venezuela will see the steepest pay increases (29 percent), followed by Argentine organizations (24.5 percent). The smallest increase is forecast for Guatemala (4.5 percent).

• Asia—up 7.6 percent. Pay increases in the newly emerging “second generation” of high-growth Asian economies are outstripping those in the region’s more developed countries. In Japan, wages will increase just 2 percent in 2013, whereas in less mature markets—including Vietnam (12.8 percent), Indonesia (10.6 percent), the Philippines (8 percent) and Malaysia (6.2 percent)—wages are rising rapidly. China is the biggest surprise, according to Hay Group, as the intensifying “war for talent” will see wage hikes of 9.5 percent in 2013—up 1.1 percent from a year earlier—despite slower economic growth.

• Middle East/Africa—up 6 percent. In Egypt, pay is expected to climb by 10 percent, followed closely by South Africa (7 percent). By contrast, Middle Eastern economies such as the United Arab Emirates (5 percent), Oman (5 percent) and Bahrain (4.3 percent) can expect more modest wage increases.

• Pacific—up 3.5 percent. For Australia and New Zealand, salary predictions outpace those of other developed markets only slightly. The average predicted rise has not changed in the region in the past three years.

• Europe—up 3.3 percent. Crisis-weary companies in Greece and Ireland will not raise pay in 2013. Increases in Germany, the U.K. (both 3 percent) and France (2.6 percent) will be subdued. Meanwhile, emerging eastern European countries will see larger increases, led by Ukraine (10 percent).

• North America—up 2.9 percent. The U.S. economy is expected to grow by 2.1 percent in 2013, Canada by 2.2 percent and Mexico by a slightly healthier 3.9 percent. Still, salary growth in the region is set to outpace inflation, which is predicted to average 2.6 percent regionally.

Hay Group’s research is based on the salary expectations of more than 20,000 reward specialists in 69 countries worldwide, representing 14 million employees.